Watch video Panic: The Untold Story of the 2008 Financial Crisis – FULL EPISODE | VICE Special Report | HBO on HBO channel on Youtube, then write an 500 words minimum essay answering the question at the end of the text.

In the fall of 2008 the collapse in the housing market in the US brought down the economy, and put a number of major banks and investment companies at risk of complete failure.

Why?

It turned out at a comparatively high percentage of those who had purchased homes between 2000 and 2007 really lacked the long term ability to pay for those homes.

So the first problem was that the actual mortgage itself, the paper contract between a bank and a customer, was judged to be solid, and to be increasing in value by several percentage points every year since at least 2000.

Compounding this difficulty considerably, the second problem was, that billions of dollars of stock – bond speculation had been generated on the assumption that in fact those mortgages were solid, were a good investment.

That is, people bet, through purchase of bonds, on the value of those mortgages.

So when home owners began not making their monthly payments, and banks needed to foreclose on them, and take the homes back, the value of homes nationally reversed from climbing UP, to instead dropping DOWN

Making all those billions of investment bets against mortgages lose value, and more value

And the banks and investment companies holding those bets, those bonds, were in danger of total collapse.

This was at the time of the 2008 presidential election.

The Secretary of the Treasury, Henry ‘Hank’ Paulsen, and Federal Reserve Chairman Ben Bernenke, talked with the Congressional leaders in Washington, and created a plan to inject 700 billion dollars into the Wall Street banks to keep them from failing. And then, days later, inject another 300 billion into the top banks, like Bank of America, and investment banks, like Morgan Stanley.

Critics did not like Congress giving all this money to the banks.

Critics said ‘These banks had created the bonds (the bets) that home mortgages were a good investment. And these banks had given home loans to people who could never afford to make the payments. So they should be punished for harming the economy, not rewarded for doing it.’

Paulsen said, ‘If you let a bank like Bank of America fail, because you want to punish it, that bank is big enough to take down the US economy with it.’

Critics said, ‘You are saying that the banks are now too big to be punished for wrong doing. So what incentive do they have, ever, then, to act honestly, if they know, every time, you will come along and give them money, bail them out, if bad decisions come back to hurt the country?’

Paulsen said, ‘Blame for the mortgage crisis can be shared very, very widely. But if you give the banks the money now, in two years, the economy will turn around, and the economy will be better, and the banks will just give us the money back, and the US will avoid a ‘Greece type’ economic disaster. So isn’t that justification enough?’

Congress voted for the US Treasury, for Hank Paulsen, to get all of the money he wanted, nearly a trillion dollars, he dispersed it the way he said. The US did not have a ‘Greece type’ economic disaster. Gradually, the US economy picked up.

There was a lot of US protest however. One mass movement was called ‘Occupy Wall Street’ and involved hundreds of protesters laying down, camping out on the sidewalk in front of the entrance to the New York Stock Exchange. The point of the protest was the charge of a serious economic inequality that had come about with the 2008 crisis.

That is, there was an economic emergency that was not caused by the ordinary people, it was caused by clever banking tricks by big companies; then, everybody was hurt by the crisis, and then the government stepped in and helped the banks. In the year, and then two years, then three years, after the crisis, the banks fully recovered their strength, but ordinary Americans were still in a recession.

Greece imposed austerity upon all of its people, the banks, the corporations, the people. The US did not impose austerity on its banks or its corporations. But the ordinary working people felt as if they were subjected to serious austerity. Since 2008, the time of the crisis, wages in the US have been almost completely flat — that is, working people today are working for almost exactly what they were being paid in 2008. Nobody is getting offered raises at work.

Essay question:

After watching Panic: The Untold Story …. Which of the government officials in the video seems trustworthy or believable in his (or her) estimation of what was happening in the financial crisis:

Secretary of the Treasury Paulsen?

President Bush?

Senator Obama? (candidate for President)

Federal Reserve Chairman Ben Bernanke?

Josh Bolten?

Jamie Dimon (President of JP Morgan)?

Isaac Sorkin (economist)?

Tim Geithner (banker, future Secretary of Treasury)?

Rahm Emanuel, Congressman?

Ted Poe, Congressman?

Which of these people – if any – was trying to fix something that was going bad? Which – if any – was mostly taking care of his elite friends in the banking industry?

Explain.